New lending rules and what it could mean for you

It may be too late for those borrowers who are already in trouble, but the Federal Reserve Board today proposed tighter mortgage lending rules that many say are long overdue.

What could this mean for future borrowers?

For high-risk mortgages (a loan that is three percentage points above the yield), here’s what it means:

Creditors can’t give you a loan without considering whether you can actually pay it off, though some consumer advocates say it won’t be enforceable because you’ll have to show “a pattern” of such practice.

Creditors must verify your income and assets before giving you a loan.

Lenders can’t compensate mortgage brokers “yield-spread premiums” unless the broker discloses its total compensation to you in writing. I wrote about yield-spread premiums earlier. Critics wanted the Fed to eliminate YSP entirely.